Curt Epperson, 

Attorney at Law

P.O. Box 627   Manson, WA.  
509 687 6236

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Information herein is  for general purposes only and cannot be used or applied to any specific legal situation or relationship.

The information contained in these Web pages is designed to provide accurate and authoritative information in regard to the subject matter covered. The information is provided with the understanding that this Web presentation is not a legal, financial or accounting service, nor legal, financial or accounting advice. If legal advice or other expert assistance is required, the services of a competent professional person should be sought.

SELLER FINANCING:  TIPS TO HELP EVALUATE BUYERS

Seller financing means that you make the loan for the purchase of your property.  Before granting credit to anyone you should take a few basic precautions.  The following tips will help you evaluate Buyers.

 1.         Get some basic employment information from prospective buyers.  The information you require might not be as extensive as what a bank would ask but it’s along the same lines.  This should include the following:

a.               Employment status.  Current job and length of employment is important.

b.               Job history.  Look for a stable job record. 

c.               Income and salary history.  Make sure the Buyer can make the payments.  A record of increasing income is a good sign.

d.               Spouse’s employment.  One income might not be sufficient.  Two can be more than enough. 

2.         Find our about the Buyer’s credit history.  (Check both spouses).  Require credit reports and make the transaction contingent upon your approval.  Look for items like:

a.               Past due or unpaid utility bills. (Phone, power, water, sewer, etc.)  People who don’t pay their utilities on time are not good credit risks.

b.               Bankruptcy.  This should not be an automatic disqualifier but it demands attention.  If there is a past bankruptcy, find out why.

c.               Judgments or lawsuits.  A record of judgments and lawsuits is not a good sign.  Make sure you get all the correct details.  Unpaid judgments are a very bad sign.

d.               Other credit problems.  Late payments on credit cards, late payments of alimony or child support and unpaid medical bills may all indicate a bad credit risk.

3.         If you are selling a residence find out if the Buyer intends to live there or rent it out.  People are less likely to default on payments for their home.  That’s why banks charge higher loan fees for investment properties.  If the Buyer is an investor find out if she has other rental properties.  Successful management of residential rentals requires expertise and experience.

4.         Ask if the Buyer has ever defaulted on a home loan or property loan.  If so, get all the facts and details.

5.            Require a complete, signed financial statement with credit references and make the transaction contingent upon your approval.  Call references and make sure that payments are timely.  Past or present landlords may be an excellent source of information.  Most private loans (and rental histories) are never reported to credit reporting agencies so they won’t show up on a credit report.  Also, make sure the Buyer is not deeply in debt or already tapped out with high monthly payments.

Finally, before you agree to grant seller financing to anyone be sure you personally meet the Buyer.  Your impressions, intuition, and judgment are very important.  Don’t forget to look for details like nice clothes, a clean car, and decent manners.  You are about to loan a lot of money to a stranger.  You should require complete and truthful information.  Remember, a little caution will go a long way.